Are Tokenized Treasuries Safe?

The underlying assets of tokenized treasuries are short-term treasuries with very low credit risk, but tokenized treasuries are not as safe as holding treasuries directly. Tokenization adds issuer, custody, redemption and on-chain technology risks on top of the treasuries, and whether a product is safe depends on how reliable these arrangements are.

What Risks Do They Add Compared with Holding Treasuries Directly?

When holding treasuries directly, investors rely only on the government’s credit and their own custody account. With tokenized treasuries, a fund or SPV, a fund manager, a custodian bank and a token contract sit in between, and any of them can fail: assets may not be truly segregated, NAV may be miscalculated, the contract may be attacked, or the issuer may shut down.

In addition, tokenized treasuries are usually fund shares, and investors’ rights are defined by the offering documents. If the legal structure is unclear, whether token holders can recover assets first when the issuer runs into trouble becomes an open question.

How Do Their Risks Differ from Holding Stablecoins?

Both often hold short-term treasuries as underlying assets; the difference lies in price and liquidity. Stablecoins aim to hold $1 and have good secondary-market liquidity, but they can depeg. The NAV of tokenized treasuries rises with interest and can fluctuate slightly when rates move sharply, and their secondary markets are usually thin, so holders rely mainly on redemption with the issuer.

So under stress, the risk for stablecoins is price deviation, while the risk for tokenized treasuries is more that redemptions slow down and they can’t be turned into cash right away.

What Should You Check When Evaluating a Tokenized Treasury Product?

First, custody and segregation: which custodian bank holds the underlying treasuries, and are they segregated from the issuer’s own assets? Second, disclosure: does the issuer regularly publish NAV, holdings and independent audit reports? Third, redemption: when can you redeem, how long does settlement take, and are there limits or terms allowing redemptions to be suspended?

Fourth, the contract: has it been audited, who holds admin permissions such as minting, freezing and upgrading, and are these permissions jointly controlled by multiple people? Fifth, multi-chain versions: is the product on each chain natively issued or moved through a cross-chain bridge? The latter adds a layer of bridge risk.

What Do Holders Need to Manage Themselves?

Tokenized treasuries can only be held in registered addresses, and the private keys to those addresses are the control over the investment. If a private key is lost, the holdings can be recovered or force-transferred through the issuer, but only after a lengthy review; if a key is stolen, the tokens may be redeemed or moved before the issuer can freeze them. Holding addresses should therefore be protected with multi-party control and approvals, like other large assets.

Together, these are how the main risks of RWA apply to treasury products.

Conclusion

The underlying assets of tokenized treasuries are very safe, but whether a product is safe depends on custody and segregation, disclosure and auditing, redemption terms, contract permissions, and the holder’s own private key management. Check each of these carefully before deciding how much to invest.